Juul built an e-cigarette empire. Its popularity with teens threatens its future

  • Juul's e-cigarettes have become the dominant force over the past year.
  • Juuling is popular among teens, though Juul says its e-cigarettes are meant for adult smokers.
  • Schools are trying to control Juul use, while regulators are scrutinizing the e-cigarette brand.

A phone beeps. Someone's vaping in the bathroom again.

Detectors scan Plainedge High School's most popular girls' and boys' bathroom for chemical changes in the air that signal someone's vaping. When it senses a change, it alerts administrators. The Massapequa, New York district decided to install the detectors to help control a surge in students using e-cigarettes.

Schools across the country find themselves similarly searching for solutions. With flavors like creme brulee and mango, one brand in particular, Juul, has become a phenomenon among high school and middle school students. They decorate them with colorful cases and post the pictures of themselves "Juuling" on social media platforms like Instagram — despite a federal ban on sales to minors.

Over the past year, Juul has rapidly overtaken the U.S. e-cigarette market. Sales have skyrocketed nearly 800 percent, helping Juul capture a 71 percent of share of the market, according to Nielsen. Juul's rise has attracted venture funds and given it a stunning $15 billion valuation — but it's also drawn scrutiny from parents, teachers lawmakers and regulators.

Juul now finds itself at the center of what's becoming arguably the most contentious battle over nicotine use in decades. The company has tried to convince critics it wants to help adults switch from smoking conventional cigarettes, not hook kids. So far, criticism hasn't quieted.

If anything, it's only gotten louder. And that may pose a problem for Juul.

'An epidemic among kids'

A Juul looks like a trendy piece of technology, not a clunky contraption or a mock cigarette like some other e-cigarettes. The device is about as long as a palm of a hand. It's thinner than an iPhone and weighs even less. To use it, a person simply snaps on a pod filled with nicotine liquid and inhales.

Its eight flavors range from Virginia tobacco to fruit medley. Each pod contains 5 percent nicotine, as much as a pack of cigarettes. The salt-based nicotine liquid delivers a more satisfying hit than freebase nicotine, which most other e-cigarettes use, without becoming harsh on the throat.

Juul says it has designed a tool to satisfy adult smokers; critics say they've merely developed a powerful way to addict a new generation to nicotine.

Efforts to curb cigarette smoking have been so successful that the rate of high schoolers who smoke cigarettes dropped to a record-low 8.8 percent last year, according to the Centers for Disease Control and Prevention's Youth Risk Behavior Survey. That's down from the high of 36.4 percent in 1997.

A Juul Labs e-cigarette is charged on a laptop computer next to flavored pods in this arranged photograph taken in the Brooklyn, New York. 
Gabby Jones | Bloomberg | Getty Images
A Juul Labs e-cigarette is charged on a laptop computer next to flavored pods in this arranged photograph taken in the Brooklyn, New York. 

An overwhelming majority of people between the ages of 18 and 29 perceive cigarette smoking as "very harmful" to one's health, while a minority of them say the same about e-cigarettes, a recent Gallup poll found.

“The majority of kids I’ve taught or been around don’t like cigarettes,” said Valerie Phillips, a physical education teacher at C.D. Fulkes Middle School in Round Rock, Texas. “They know it’s bad for your health and can cause cancer. They don’t want to smoke cigarettes, they think it stinks.”

Teens don't appear to feel the same about e-cigarettes, which eclipsed cigarettes to become the most popular commonly used tobacco product among middle schoolers and high schoolers, according to the CDC's National Youth Tobacco Survey.

Juul's popularity has vexed teachers who say students across sterotypical social groups are juuling, as it's become known. Matt Aiello, a dean at Lake Zurich High School in Lake Zurich, Illinois, said his administration stresses to parents the trend isn’t isolated to who they might consider “bad kids”; everybody’s doing it.

“It’s part of them,” he said. “They carry their cellphones and they carry their Juuls.”

Schools are rushing to educate students, parents and teachers about the risks associated with using e-cigarettes. They're hosting assemblies during the day and workshops at night.

One nonprofit health organization, Coordinated Approach to Child Health, or CATCH, revamped its e-cigarette curriculum to include information on Juul because the brand has become so popular. Currently, CATCH My Breath lesson plans are geared toward middle schoolers and high schoolers. Program manager Marcella Bianco said some schools and states are asking for elementary school lesson plans because children as young as eight are being caught with e-cigarettes.

“It’s an epidemic among kids,” she said.

Some schools, like Plainedge High School, are installing vaping detectors. Soter Technologies, the company that makes the vaping detectors, says it has received thousands of inquiries and issued more than 1,000 contract proposals for the $995 device.

On average, the detectors send 10 alerts per day, said Plainedge Public High Schools Superintendent Ed Salina.

“Word is spreading, so that has deterred them a little bit,” he said. “But the truth is it’s just another mechanism we’re using to provide us with intelligence to manage students and help them choose."

Youth use has become such a lightning rod that it has overshadowed stories of people using Juul the intended way.

‘Like hitting a cigarette without the bad stuff’

Travis Barker loves smoking.

The digital sculptor used to go through two-and-a-half to three packs of cigarettes a day. Only 32 and otherwise in shape, Barker couldn’t walk upstairs without feeling winded.

He constantly felt lethargic, almost like he had the flu. He tried quitting cold turkey. That didn’t work. He tried other e-cigarettes. Those didn’t work. When an employee at a vape shop suggested he try Juul, he was skeptical.

“I said, 'I don’t believe it will help,'” said Barker, who lives in Lakeland, Florida. “Sure enough, it’s like hitting a cigarette without the bad stuff.”

After 12 years of smoking cigarettes, Barker hasn’t had one since he started using Juul almost four months ago. He ran a mile and a half in May and wasn’t out of breath.

Juul says its products are meant for people like Barker: adult smokers. The company, like some others, view e-cigarettes as an alternative for people who can't or don't want to stop smoking.

Fewer young people perceive vaping as harmful to their health than other age groups

Age group Smoking very harmful to health Vaping harmful to health
18-29 83% 22%
30-49 85% 40%
50-64 81% 40%
65+ 80% 48%
Gallup

Food and Drug Administration Commissioner Scott Gottlieb supports this idea. As part of his sweeping plan to overhaul tobacco regulation, he wants to reduce the amount of nicotine in conventional cigarettes to minimally or non-addictive levels. In doing that, Gottlieb recognizes he needs to give people who are already hooked another less harmful option.

However, Gottlieb finds himself in a tougher position as more young people use Juul and other e-cigarettes.

Lawmakers, including Senate Minority Leader Chuck Schumer, have condemned Juul and pressed the FDA to do something to control youth use. Massachusetts opened an investigation into the company in July to see whether it violated state law in failing to prevent minors from buying its products.

"Any responsible party that wants to market products to adults needs to step up," Gottlieb told CNBC in a July interview. "We have a window of opportunity to address this, and if the youth use continues, we'll lose that opportunity."

The rising popularity among teens doesn't change Gottlieb's mind in terms of the potential e-cigarettes can have to help adult smokers, but it does require the agency to ramp up its regulatory oversight, he said.

Earlier this year, the FDA requested information from Juul on how it markets its products to kids. It has received tens of thousands of pages of documents, Gottlieb said. The agency has also ordered a blitz to catch retailers illegally selling e-cigarettes to minors. In September, the FDA will launch its first campaign targeting youth e-cigarette use.

Eventually, Juul will need the FDA's permission for its current products to stay on the market. E-cigarettes that were introduced before Aug. 8, 2016, were supposed to undergo review starting this year, but the agency extended the deadline until 2022. When that time comes, regulators will evaluate Juul and other e-cigarettes' overall public health benefit, and having hoards of underage users will likely count against them.

“If these manufacturers don’t do more to address the youth use of products, they won’t be able to stay on the market," Gottlieb said.

Manufacturers introducing new products after Aug. 8, 2016 must first apply with the FDA. So if Juul wants to add any new flavors or devices, it'll need the FDA's authorization.

Juul said it too believes "it is critically important to prevent minors from using e-cigarettes," and it's "committed" to keeping its products "out of the hands of young people."

‘A challenging area’

Juul has been on the U.S. market for three years, but it truly took off last year. Retail sales hit $1.11 billion, according to Nielsen figures. Its dollar share of the market soared to 71 percent this year from 23 percent last July, according to Nielsen data compiled by Wells Fargo analyst Bonnie Herzog.

With the growing sales and fresh round of fundraising, the company is planning to expand overseas. It's already debuted Juul in Israel, England and Scotland, and it's eyeing Asia next, a source familiar with the matter told CNBC.

Juul says it doesn't know exactly how many minors are using its products. Gottlieb, the FDA chief, finds that "incredulous."

The bulk of Juul's products — 90 percent — are purchased at retail stores, the company said. It's spending "considerable resources to quantify and help stop underage users" from buying products at these locations, which Juul said "are not under our control."

Juul has pledged to spend $30 million over the next three years on research, youth and parent education and community engagement. It stopped featuring models on its social media accounts and now showcases former cigarette smokers.

However, that doesn't stop kids from posting their own pictures on social media. There are photos and videos on Instagram of young people vaping marked with hashtags like #juulgang, #juulnation or #juultricks. Juul has started working with Instagram and parent company Facebook to scrape inappropriate posts.

The company stopped reaching out to schools to develop an e-cigarette curriculum earlier this year after learning that having its name attached would be more harmful than helpful, said Juul's Chief Administrative Officer Ashley Gould. Massachusetts Attorney General Maura Healey ripped Juul for even trying this approach during a press conference in July.

Instead, Juul is now working with Iowa Attorney General Tom Miller to develop strategies to tackle the rise in teens using its products.

“We want to be involved, but we don’t want to do anything that could be perceived as negative or could actually have the opposite effect,” Gould said. “It’s a challenging area, and I think that getting advice from experts is best thing we could be doing.”

Regardless of its efforts, pressure continues building. Some teachers and parents despise the brand. At least three lawsuits have been filed against Juul for allegedly marketing its products to young people and addicting them to nicotine. Juul said it "does not believe the cases have merit and will be defending them vigorously."

Yet Juul's dominance shows no signs of slowing.